MATTHEWS v. WISCONSIN ENERGY CORP. (June 1, 2011)

After almost 20 years at Wisconsin Energy Corporation, Bernadine Matthews left the company in 1999. In 2003, Matthews and WEC settled a lawsuit that she had brought regarding reference requests. As part of a settlement, WEC agreed to respond to any reference requests in accordance with its policy existing at the time of the request and agreed not to say that she had been fired. In 2005, Matthews filed suit alleging that WEC breached the agreement twice in 2004. At about the same time that she filed suit, Matthews hired a consultant, Howard Schwartz, to help her find a job through a federal program for disabled persons. She gave Schwartz permission to contact third parties, including her former employers, to gather personal information. Schwartz sent a letter to WEC requesting work history confirmation and job performance comments. He advised WEC that he was assisting Matthews in her job search and that she had authorized the release of the information. One of WEC's attorneys responded. She told Schwartz that she would only provide basic work history, not performance comments. She also told him that Matthews had sued the company regarding their responses to reference requests. The district court granted WEC's motion for summary judgment and awarded attorneys’ fees. The Seventh Circuit affirmed for the most part, but reinstated the breach of contract claim based on the conversation Schwartz had with WEC's lawyer. That count was tried to a jury. The jury found for WEC and Judge Stadtmueller (E.D. Wis.) again awarded fees. Matthews appeals.

In their opinion, Chief Judge Easterbrook and Judges Bauer and Evans affirmed. The Court first addressed Matthews' position that the district court erred in allowing WEC to argue that she waived the provisions when she allowed Schwartz to gather personal information. It rejected both her arguments: a) WEC was not required to plead the affirmative defense of waiver because Matthews did not include the facts giving rise to the defense in her complaint (in fact, the conversation had not yet occurred), and b) the settlement agreement's writing requirement applies only to joint waivers that would affect the meaning of the contract, not to a party’s unilateral right to waive a contract term. Second, with respect to the breach and damages instruction, the Court reviewed the substantive jury instructions as a whole and found no error. Third, the Court concluded that the evidence was sufficient to support an instruction that the jury could find that Schwartz was acting as Matthews agent. Matthews submitted the instruction in a joint pretrial report, she put into evidence a stipulation that presumed agency, and she granted Schwartz broad authority to gather information on her behalf. Although the Court concluded that the evidence was not enough to establish agency as a matter of law, it was enough for the jury to find agency. Finally, the Court affirmed the district court’s award of almost $600,000 in attorneys fees. Since the fee shifting provision was in a contract and not a statute, the Court applied a "commercially reasonable" standard. Given that WEC paid the fees before the jury verdict and that Matthews' final settlement demand was $500,000, the fees are commercially reasonable. The Court declined to reduce the amount of fees on the ground that WEC did not prevail in every single respect or on the ground that the award created a financial hardship for Matthews.